CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

An 8% 20-year convertible bond issued by Trading Inc. is trading at $1030. Each bond has a face value of $1000 and is convertible into 20 shares of Trading Inc., which are currently priced at $45 per share. The company is expected to pay annual dividends of $1.5 per share indefinitely. The market conversion premium ratio is:
A. 12.6%
B. 13.2%
C. 14.4%
Explanation: Market conversion price = $1030/20 = $51.5
Market conversion premium per share = $51.5 - 45 = $6.5
Market conversion premium ratio = $6.5/$45 = 14.4%

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